how much of a surprise were they? >> i think that, you know, 15,000 doesn't sound like a lot on initial but it was a surprise because it doesn't even represent the absolute value. meaning, we're looking for a drop. wee ended up 15,000 again. we're at 25,000 off the expected pace. and even though i think many understand there's going to be a leveling off on benefits, it's going to probably get bigger as time goes on because these extension program, they run out as well. and i think many will agree that we're in a moment where job loss may become less. but at the end of the day these are all terrific reasons for hope. maybe that's why stocks have the run off the bottom that they've had. what's next? that's what traders want to know. i think watching the dollar, as art cashin has been saying, seems to be the strategy for an august where even if the crisis persists and recession is ongoing, it's still a bit slow and traders are doing just about any little trick during the day they can to make money.

i think we have to watch how the employment data looks when we get into september. back to you. >> thanks, rick santelli. let's find out how it's going premarket. bob pisani, are you there? >> how are you doing? talking to the traders here. futures dropped a bit on the jobless claims, as you mentioned. chinese stocks rallied 4 1/2%. speaking of china, what do you do when you have a country that won't buy commodities without any regards to supply and demand? if you're rio tinto, you wave a big flag. they're very cautious about the recent really in prices, noting much of the rise was due to china, stockpiling commodities. dick's sporting goods up 9%. beat second quarter estimates. 4.1% decline in same-store sales. they did boost their full year same-store sales outlook. that's certainly good news for them. heinz beat estimates. higher prices though, cost effective controls. very good for them. sales were down 4 1/2%. key thing for heinz, affirming

their full year guidance. scott, how are we at the nasdaq? >> likely have a flat this morning. big cap tech with modest gains off the open, google up 2%. taken higher to $5.60 to $5.10. they expect revenue growth to reaccurate. apple, rim, microsoft, dell, intel, in positive territory. netapp is not. they beat the gate. no forecast for the current quarter. they announced a new ceo -- coo tom gets a promotion there. sears holdings down 13%. they reported a loss. the street was looking for a gain. revenues were a little bit below estimates. petsmart down 12% as well. double take there because we have a number of stocks that are accelerating. petsmart downgraded at credit suisse. hot topic down. they reported a wider loss. jack in the box supposed on an upgrade over at j prpmorgajpmor.

we're about 30 cents weaker since open outcries started down here at the nymex. accelerating at this point. down 53 cents. we were down 35 cents when the jobless claims came out 35 minutes ago. it's been a heck of a week. five-day chart, we were talking about 60 bucks a barrel earlier in the week. now we're staring $75 dead in the face. keep an eye on the trend. they change quickly. quick look at brent. i reference crude oil. talk about that draw down in inventories, is it demand or import? most people say it was imports. brent is weaker. so the spread widening a little bit. quick look at natgas, heating gas. natgas is negative. of t. other two chinking to gains. metals, the dollar is stronger. gold was positive. now negative. silver was positive, now negative. i won't repeat what bob pisani had to say with rio tinto and the chinese agency.

>> thank you very much, sir. let's check out what happened in europe. still happening, in fact. not too bad. you know, cac up about the same thing. dax close to it. they obviously not as concerned about the jobless claims numbers as we are. and i should probably mention to your our futures are continuing to sink. they're now down 2 1/2. now below fair value. christine thomas has a breakdown of what happened over in asia overnight. >> once again, markets here tracking stock movements in china, getting a boost of a rebound in chinese shares from a two-month low. shanghai composite is rallying 4.5%, they regulated new mutual funds to help support the market. they hope to lift the other by japan and hong kong and tokyo. the nikkei rose 1.8%. japanese market is up 40% from march lows. traders saying any drop in the

chinese market would be used to take profits in tokyo. hong kong, hang seng finished higher. shares of china mobile fell after announcing a 1.6% drop in quarterly earnings. after the bell, second quarter net profit came in better than expected. net interest income, however, fell from the year before. that's it from asia. sending it back to you. up next, we've seen the softer side of sears and it's this quarter's results. mary thompson will take us inside the numbers in moments and preview gap, which is due out after the bell today. >> and the faber report, david will have more on sears and perhaps one of its big investors. and the word on the street and the buzz beyond. s that jobless number, is this really going to stop the rally or not? we'll find out. we'll be back. i'm racing cross country in this small sidecar, but i've still got room for the internet. with my new netbook from at&t.

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because i believe she had the headline on sears. mary? >> that's right, erin. surplice from sears holding and, of course, it's not the kind you like. weak apparel sales in k mart and appliances and patio furniture contributing to a unexpected second quarter loss.

excluding charges for store closing they lost 16 cents a share. belowe estimates of 35 cents a share. stock has been recovering, revenue has not, dropping in the last three months to a slightly less than expected $10.6 billion from $11.75 billion. the environment remains difficult. reflected in the 8.6% decline in total same-store sales while same-store sales also declined in the double digits at sears and down 3 .9% at the discounter k mart in the second quarter. the retailer which is owned by hedge fund manager eddie lampert is prepping for what is expected to be a tough holiday season. it's going to open toy departments in some sears stores as well as offering lay away for the holidays. after the bell today the nation's largest specialty retailer reports its result '. two weeks ago gap has upbeat forecast saying earnings would be between 30 cents and 32 cents a share. forecasts have climbed since

then. they're looking for profits of 32 cents a share on revenue with 3 and a quarter billion dollars. the gap stock has been on a tear over the last six months, amade signs turn around appears to be taking hold. importantly, sales decline appear to be slowing at the old navy unit and international operations have shown signs of improvement as well. as the company has been keeping a tight control on both cost and inventories. mark, back to you. >> mary, thank you very much. for more on sears, let's see what the brain is thinking about back at hq. david faber? >> softer side? >> thank you, mark. you know, interesting, of course, mary doing the numbers there at sears, which is -- stock of which is looking down sharply this morning. thought we would look a little further into the numbers as well, of course, as mary told you. sears domestic comparable sales stores down 12 1/2%. the k mart comparable store sales declining 3.9% in operating loss. overall, a $58 million.

what's interesting here and in contrast to what we've seen in a number of the other retailers that have reported over the last few weeks is the gross margins. interestingly, gross margins have actually been increasing at many of the large retailers. not so with sears holding where's the gross margin was flat. a total decline actually in gross margin dollars of $310 million. they did cut a lot of cost. but take a look. sears is flat. tar fwet was up 80 basis points. jcpenneys was up. walmart was up 90 basis points. interesting, in this environment that you would have gross margin improvement. if you would tell a retailer a year ago you were heading into the worst recession since the depression and you end up with better gross margins they would say, really? at that point speaking this morning to one of my retail sources, david berman, who runs a hedge fund that focuses solely on retail, he pointed out as well that in his early tracking of retail, 39 of the 42 that

have reported earnings have more cash and/or less debt than they did a year ago. also, interesting. now, what is going on here? you know, there have been some thoughts that perhaps walmart is the leader has not been bringing price down as aggressively as it might, hence the increase in gross margin. if walmart doesn't bring price down as aggressively as it might be able to, target doesn't have to bring price down. we'll see how that all winds up. interesting to note, of course, sears does not appear to be in that camp, with that loss of $58 million. again that total decline of gross margin dollars of $310 million. that will result in the stock selling off. look long term because the stock, of course, has been, well, it's up well off the lows that we saw, what, six months back or so. you can see how it's looking there, or you almost did. overall, they also continue to buy back stock.

2.7 million shares in an average cost of $49.62. mark, we'll see how that thing looks once we get to the open. you can see looking down as much as 12% against sears. well off the lows but it's going to be a bad day today. back to you. >> david, thank you. up next, the word on the street and the buzz beyond the trading floor. later, "because you clicked" we're gearing on the one financial that cramer says is buy. citi. most searched up stock on cnbc.com. you clicked it. we are going to pick and bring you the top-ranked analyst to go inside those numbers from citi. if you've a sovereign wealth fund he would come in and buy 10% of the company from the u.s. taxpayers.

futures are lower, as you can see. they were higher on the back of the gain in china. they then turned low we on the back of the unexpected jump in weekly jobless claims. we have news, world just out from general motors it will provide cash advances to dealers. those are the dealers phil lebeau has been reporting on that they've been waiting on their cash for clunkers rebates from the government. the past two months exceeded the internal forecast by 60,000 vehicles thanks largely to the clunkers program. transportation secretary says cash for clunkers will be wound down soon. nasdaq last night the national automobile dealers association started a privately funded new program. the group launched the venture because dealers veer the $3 billion clunkers program will

run out of money before they get reimbursement for the discount. it allows the trade-in value of up to $4500. all working vehicles older than 2007 models are eligible, regardless of few efficiency, which is key. purchased or leased cars with two miles per gallon higher economy. which links to what the government program had as well. one note, chief website says that buyer intent is down more than 30% from the peak and they think we're going back to normal automobile purchases. not much of this is staying around to increase buying. in washington, the obama administration is going to trim that budget deficit forecast. we're tell you a bit about that, we thought it was important. they now say the fiscal deficit for '09, the year we're in, is $1.58 trillion. $262 billion lower than predicted in may. official says that drop is due to the elimination of that $250 billion they set aside, i believe it's part of t.a.r.p., in case they needed more money for financial bailout.

they now think they don't need it and they're ready to put their money where their mouth is. they're going to announce it next week. mark? down on the floor now with the one and only dr. gordon charlop. >> good morning. >> from rosenblatt. what's up? >> i'm in seattle for the sda conference. look forward to that. if you're asking about the markets, it's behaving almost exactly as i told you it would last week. you need me to refresh your memory. i told you relanguish at this level. >> yes. >> and we have. and i, again, still believe that once the big dogs come back after labor day, we're going to start to see some activity to the downside because just a week in consumerspending. i think that's been evidence today by what happened with sears holdings early in the morning. you know, the jobless claims are still tenuous here.

four-week moving trend, you will see it's trending slightly higher. china did rebound yesterday but i think the strength in then is te yen is telling you there's still a risk over there. we're stuck in a holding pattern here for a little bit, mark. >> the risk is to the downside? >> the risk is to the downside, yes, sir. >> more likely we break out to the downside than the upside? >> i think so. i think when people start to look at -- start to forecast sales going into the holiday season and those kind of things, that's going to be tind caters that are going to go a little bit lower there, mark. >> this is possible when, as you put it, the big dogs come back after labor day? >> and start to get it going. >> pushing -- >> they know who those big -- >> pushing you puppies out of the way? are we admits there that -- >> i'm admitting with the job market so weak -- i'm glad you're a tomato farmer because you always have that to fall back on. i'm a big fan of yours. >> all right.

dr. gordon charlop from rosenblatt. back to erin. thank you, mark. joining us from midtown manhattan, dave rovelli. dave, what are you looking for today? china gives us encouragement, jobless claims, raise a specter of economic recovery that is near stabilization, not improvement. >> believe it or not, erin, i'm looking for an up day because volume is so anemic. volume is 50% levels at the same week last year. take the 90 days -- the last 90 days' moving average, we're trading at 60% levels of that. so it's when it's a dull market, i've learned one thing over the years you don't short a dull market. the day traders are going to keep the market up. >> and so just over the next -- is this just until september starts and congress is back talking about health carrigan and we get the latest labor report? is this the dog days of summer call or something more

substantial? >> i'm turning bearish but i'm too scared to turn bearish yet. i'm probably going to turn bearish in september. the quaund tative easing is going to start coming to a halt. like you said, you have all the big players coming back into the market. we have the jobs number the first week. that's not going to be good. we're fairly valued. we're trading at 19 times this year's earnings. taking out operating earnings, 24 real eps going forward p.e. to me, we're over valued and upside is probably best case scenario, 5%. after september, start selling the rallies. >> all right. so you heard it there. rally until the end of the summer just because, and then he turns more bearish. dave rovelli bewill see you before then. we have the opening bell coming up on the other side. >> people go back to school, all kinds of memories for some people weren't that please sant.

>> september does have it shares of history. don't go away. we'll be right back.

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all right. welcome back to cnbc "squawk on the street." opening bell is going to ring in about three minutes. time now for our one thing, one thing. >> what's your one thing, mark? >> check out a chart of the yield on the two-year note. >> while it's coming up. >> you see that? that's -- look at that yield decline. we were at 1 1/4 or better, just less than two weeks ago. and now we're at 1%. we were at .97% yesterday.

and my point of this is, what you're seeing there is an aversion to risk. you're looking at people fleeing from risk. that's one of the reasons stocks have gotten really, really choppy here is that chart shows you money flowing in the treasuries, especially the two year. >> my one thing is barnes and noble, bks, it's going to open higher. they have the same issue as everybody else, declining traffic in the stores. they really got there by cost cutting. there was something i thought important, and that is online their sales were slightly above where they were last year. so we know more people have been staying home. the point is, spending in certain pockets. i'm not trying to turn this into a huge statement but i did think that that stood up. and, you know, i'm sorry, stood out, as something to keep in mind, especially with the demise of the book and ride of the

kindle and all kinds of things that should mean they're dead, and they weren't. >> is faber with us? >> faber? is the softer side of "squawk on the street" here? >> faber, okay. >> no. >> i'm going to tell you about this. we have, i believe, the program numbers. no, it was not. he always wants straight numbers. it was actually rich peterson of standard & poor's of the stocks that have done the best. there are a group of stocks that have one more than 1,000%. we are going to have serve of them on. >> get out of town. >> yes. >> 1,000%? >> yes. and we went and actually checked market capitalizations. these are not $50 million companies. they're all $600 million or more. the former boise cascade, you may remember the paper, timber company. they almost died. and they made it through the crisis. and now they are up more than 1,000%. we're doing to have the ceo on and find out what's going on there. really fascinating group of

companies. lots of auto parts. this one an advertising and media company. and we are excited about it. that comes up later today. >> here at the big board, index iq, index loss of iq heads macro tracker. i don't know what that means. iq heads macro tracker etf. ticker mcro. at the nasdaq, actors, la dell? >> la dell. i thought she was great. everyone, oh, gosh, there was a gilmore girl. thank you, katie. >> post grad, oh, from the film "post grad" releasing this friday. that explains why i don't know who she is. i haven't had the time, the chance yet to not see her film. >> oh, at any rate, mark. >> i don't go to movies.

i can't hear them. >> i know you don't. >> ear phones? they give us these ear phones and all those ear phones do is they make muddy dialogue louder but they don't make it clearer. >> this all may be true. as our viewers are no doubt aware, mark is sort of like a dog in that he hears selectively. selective hearing. >> i don't know what you're talking about. >> when they don't want to go out in the rain, they somehow, oh, can't hear you. when it's nice out. >> that's my dog. >> market reporters standing by. bob pisani, take it away. >> weaker here as the jobless claims number is a bit higher than anticipated here. it's been very tough in the game industry. crowd is here for gamestop. it's going to open down 8% to 10%. second quarter estimates missed. cut the full-year guidance here. game sales with the issue of video game sales down here, new game title hurting the outlook here for them as well. let's take a luck bill more

about what's going on in china. dropping 20% in two weeks. and rio tinto came out with interesting comments. they had their earnings out. they just said they were cautious about the recent rally. and noting if when you've got the chinese government going out and buying the commodity prices that can distort the market a little bit. fundamentals are getting a little mixed up here when you've got a government now buying commodities on an active basis here. let's talk about dick's sporting goods around the corner. we'll get more from that. they're opening up 13%. the important thing is, sporting good retailer boosted the full-year same-store sales outlook. same-store sales is still going to be down. they're raising the amount here a little bit. and that's important because that's an indication at least top line is moving in the right direction. >> tradertouk.cnbc.com. scott, how are we at the nasdaq? >> open we'd a modest decline, call it flat. google is the stop story. conviction buy list over at

goldman sachs. price tarkt up to 560 to 510. expect revenue growth to accelerate. google shares is up 2%. big cap is showing modest gains. apple, rim, microsoft, dell among those to the upside. intel is a bit lower. netapp is down 4 1/2%. they beat but gave no forecast for the current quarter. they did announce also a new ceo, coo steps up into the top job. he gets a promotion there. did catch apparently some people by surprise. at least that's what the analysts commentary is this morning. netapp, one of the reasons why the stock may be under pressure. david was talking about sears, down 12%. i mentioned it at the top of the hour. the street was looking for a gain. revenues a little bit below estimates. petsmart, another big loser, down 13% on a downgrade at credit suisse, the price target taken from 21 to 23. weaker than expected margins. hot topic is down 2 1/2% after reporting a wider loss.

jack in the box is up 4 1/2% after an upgrade at jpmorgan. we're trading september for the final day, we roll over to october at 6:00 p.m. eastern time. we're down right now. look at intraday chart. the dollar doesn't really know what to do and neither does crude. paramont says you might be a sideways trade today. the focus is natural gas broke that nine-day losing streak yesterday. it's to the downside now. eia numbers at 10:30 eastern time. the range is between 52 and 67 bcf. wide range. bloomberg consensus is for 67. it's be low trend. we have warmer weather in the northeast. we'll have those numbers for you live in an hour's time. quick look at the metals. to the downside across the board. traders telling me goldman has to go to 925 to get some serious buying unless we get real traction with the dollar. silver, copper, sort of playing off the china stock.

rio tinto as well. let's go to rick in chicago. >> well, thank you. and indeed if we look at the fixed income markets, once again, everybody seems to be paying close attention to the stock market post a rise in initial and continuing claims. initially took away stocks gains but the bid in treasury and, indeed, also had an affect on pushing the dollar higher. as was just pointed out, the dollar index is up a bit. not compelling but its direction is one that lately suggests day traders will be lightly potentially selling commodities and equities. these relationships are typical for the dog days of august. there's always this cycle of how summer strategies, you know, it's all about trying to find activity. there's no supply in the form of bills today. and we still have some more pertinent data like indicators and philly fed. mark, back to you. >> thank you, rick. jobless numbers, not so much damaged. modestly positive in the markets after opening a little lower.

resilience maybe? or too much m. senior church management, in chicago, maury, chief investment officer. maury, what's your take? where are we headed here in this market? >> we remain moderately constructive on the market. think it's a market of two steps forward, one step back. we get couple of good pieces of economic news and then a number like claims this morning. get a couple companies that report better than expected aaronin i earnings and somebody that isn't doing so well. look at the credit markets, they will continue to improve for the balance of 2009. looking at the health of the banking industry, with this ceo curve, the fed is allowing the banking industry to heal. and every month that goes by allows the banks to earn their way out of problem loans. look at a measure like three-month libor this morning trading at a report 0.41%.

compare that to the t-bill, 31 basis points. that spread is the lowest level since february of '07. that spread also was at 100 basis points last summer and 430 basis points looking back to '08. >> you're optimistic? are you optimistic? >> oh, yes, i am optimistic. yes. >> michael? >> yes, absolute. >> michael if. >> yes. >> how do you feel about the market? >> we're facing what is most important to us is inventory replenishment cycles which right now is where inventories are, positive boost to the economy. albeit a short-term one. inventory to sales at historic lows on a percentage of gdp, it's at a 60-year low. i think you're going to see a mad scramble to replenish inventories here to the backed of the year. it's going to prop up the market in the near term. at which points things could get murky and we're probably

starting to face stagflationary market in the before. >> if you buy the stagflation story, michael? >> you continue to focus on natural resources. the dollar is still in a weak spot longer term. i think you continue to focus on higher interest rates and the long term as the government faces increased finance costs in the future. deficits continue to rise. it's all going to be negative headwind for growth. and it all results in higher inflationaries down the road. >> one quick thing, before we go back to maury. we get the stag, we get the issue with growth. where does the inflation come from? where do you see inflation in a short term? >> well, you know, we begin to import inflation from emerging markets, particularly from china as the wealth transfer process begins, a function of the u.s. not producing anything. and solving most of its solutions by increasing the debt burden. >> all right. maury, how would you trade the environment right now? you're really going with closed end funds. you have a couple of them.

>> yes. >> why dividends? >> sure. well, the particular aspect of these funds, one is covered call strategy. we think that's a good way to play a market that has seen most of the upside so far and does have some more room to go. but we're probably, you know, probably within 10 to 15% of where we're going to end up over the rest of this year. and we think that's a good way to capture additional income. in addition, the funds that -- some of these funds i suggested here are trading around 20% discounts to their net asset values. tremendous discount in the market, average is 3% discount. we think there's appreciation to capture with the discount compression as well. >> okay. michael, do we need another stimulus for the market to continue to go up? >> personally, i think that would be a pretty poor idea. but, you know, who knows what this government will do at this point. you know, we face a major -- >> that's kind of the problem

that we face as investors in general today, isn't it? who knows what they're going to do next. >> i would agree entirely. you know, at a certain point here, you know, we're going to need to face the reality of the deficits we're krcreatincreatin. our foreign creditors are increasingly concerned with the situation here. and it appears for now that our government is content with trying to inflate away the debt burden. at a certain point this will be a negative headwind for the marketplace and for the american public. >> it ma may be early to act upon it, but shouldn't we be formulating some sort of inflation protection strategy for down the road? >> i think that makes sense. i think it's more of a late 2010, 2011 story. and i think, you know, energy is one of the areas that i think it pays to be overweighted in. and that's one of the ways to capture -- that will perform well in an inflating

environment. >> thanks so much. >> michael church, maury joining us with their thoughts. you know, i love to page through the paper. >> yes. >> it annoys the heck out of our bosses. but i find things like you can buy on nflshop.com a doggy jersey for your dog with michael vick's name on it, 40 bucks. >> 40 bucks. >> they'll sell you a dog jersey with a dog jersey. >> 40 bucks, your dog can wear that. >> that's why i love the paper. stocking on the move, prudential financial. >> and because you clicked and clicked and clicked, cnbc.com, more page on citi than any other stock. we used the right parlance here. and we're going to do your bidding and go deeper inside citi. we'll be back. some people buy a car based on the deal they get.

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well cog welcome back to "squawk on the street." matt nesto here. look at rina spaes sola. they're based in china but should be based in boston. they have an exclusive project development plan if you will, in china. the ceo says they will still lose money but goldman sachs says buy before neutral before. whirlpool appliance maker is higher. "wall street journal" is late test report they are moving closer to their own cash for clunker trade in their old, inefficient, get money, whirlpool is higher here today. prudential, second behind aig this morning.

it is raised from out perform to market perform. that's a nice 30% move. weight watchers is losing a little this morning, down over a buck right now. about a 4% giveback. it's initiated at underweight at morgan stanley. they think it's headed down to $24 a share. lastly, one of the best performers in the russell 1,000 is tech data, without with a blowout quarter, second quarter coming in at 70 cents a share. analysts were looking for 44 cents. they beat on revenues as well, erin. they say european demand is softened but american's demand, some signs of stabilization. back to you. >> thank you, matt. and as we said, seems a lot of people out there are very intrigued by the story of citi. at least whether bottom fishing might pan out there. prices have been significantly trashed in the past few months. just recently though made a rebound. it's one of the most clicked stocks in the website. time for another installment of "because you clicked." malking director of equity

research of commercial bank. david, good to have you with sglusz good morning. >> here we are in the day where a price target of $4 a share is reasonable for the biggest bank in the country. that's your target on big "c" which is in line. why -- you don't think it's a sell but you also don't think it's a buy. you don't see anything exciting? >> we don't think it's a sell because, look, they did the massive dilutive capital raise by converting the preferreds. so we do think that the company is out of the woods in terms of the downside. and, listen, erin, you know, as an analyst, you know, you fantasize about taking a $4 stock and putting a buy on it and having it go to $10 and being that guy. i've looked at this real hard. we've run a lot of analysis on this. i just can't get there. you know, eng, you know, in the best case scenario, if you look two years down the road and all the legacy, you know, problem loans and problem securities are

behind them, even then this company only earns about 50 cents a share. and that makes it maybe a $6 stock. but that's where long-term value people that can stomach the $45 billion n. is probably going to come. >> what happens if -- and i know it's very unlikely the government will do this, but it's possible and a lot of people think it's reasonable that they say we're going to have banks and broker dealers split up again. what does that do? >> well, you know, there's been a talk -- there's been talk for quite a while, even in the good days, that citi was too large and too unwieldy to be well managed. of course, poor risk management that they've experienced over the crisis would seem to support that. so, you know, they've already lost smith barney, the retail team that is a joint -- that's a sell of smith barney masquerading as a jv. morgan stanley is going to own that. if the government splits off the

investment bank, you know, i think that's going to be problematic. you know the investment bank has already lost a lot of good people. you know they need that cinergy with the commercial lending arm. so i think that would be value destroying. >> does citi need new management? >> well, you know, look, this is a very troubled company. and it already was a complex company before the crisis. so i think it's very difficult to manage anyway. and you know, vickran came in an a. pretty experienced ceo, incredibly smart guy. i don't know that they need to replace him. and by the way, if you do that, who's going to take the job? you know, i think we're probably two years out of way before they're out of the woods. liddy and guys like that realize you could come in at the 11th hour but it's still a tough spot to have and very difficult for your reputation. >> even good intentions can -- >> yeah, yeah. so i think, you know, vikram is

probably on a little bit more stable ground than people think. they made some management changes. they brought in some very veteran bankers from the out side, industry veterans to help them out. so i think that's -- that is a stabilizing situation, i believe. >> david trone, thank you. >> thank you, guys. next, lesson learned. apparently the largest u.s. college endowments are getting out of hedge funds, mark. private equity firms and other sophisticated investments right as those hit bottom and ready to go up. that was a joke. i added that last line. >> you mean the folks at harvard and yale can't figure out hedge funds? i'm shocked. solid, safe idea for the colleges. for an over-reaction that could end up hurting more in the long run. we'll take a look.

many u.s. college endowments are retreating from investing in vehicles like hedge funds, private equity due to huge losses from the financial crisis. is this move away from risk really happening? does it make sense?

joining us with his insight, donald lindsey, george washington university endowment chief investment officer. thanks for joining us. are endowments like yours and others over-committed to private equity. >> i think there is a systemic over-commitment through the system. i think it's a result basically of institutions getting hooked on above-market returns and also the institution used to getting a lot of gifts in from donors. and people forgot about liquidity. so it's a temporary slow-down but not a retreat. i think the lack of liquidity reads crisis proportions at the end of last year. and now institutions have a situation where they're not getting the exit strategies and they're not getting the gifts in the door, so they have to rethink temporarily what they're going to do. but i don't see this as a permanent retreat. >> you don't see it as permanent retreat, yet i have heard stories of endowments that essentially sold their commitments at steep discounts or simply been unable or perhaps

unable to meet their commitment when the funding is asked for by these private equity firms. >> you have two things. in the hedge fund arena, gates were put up. institutions request redemp shups but the hedge fund said, look, we can't sell. there's no market. and so they didn't get their requests for redemptions fill p ed. then you have a situation where the private equity funds that started just a few years ago still need to call on capital and, you're right, investors are very strapped for cash right now. some i understand lugss, i believe, levered at the fund level. meaning they borrowed the money and put that into liquid strategies. that hurt at this point. >> seems to be an a. dangerous thing, certainly for an endowment when you rely on that money. is there too much risk taken by our government in general? >> i think so. i think what happened is endowments became sort of an extension of the sports program, the football team. everyone was competing.

you know, years ago we didn't see our return tons front page of business newspapers and we didn't talk about returns on television. now everyone is competing and looking at other institutions and saying, what can we do to beat their returns? it became way too competitive from that aspect and people took their eye off of what their real objective was. >> but you say ultimately there's not going to be a long-term retreat here from these asset classes of hedge funds and private equity? >> no, endowments are going to go where the returns are. returns are real asset strategies and outside the u.s. i just came back from a week long trip in latin america in brazil, there's tremendous opportunities in emerging markets. still significantly risky than investing simply in the u.s. equity and bond markets, but people are going to go where the returns are. ultimately we're going to see that happen. what will happen, however, is you'll see a big reduction in the number of hedge funds and in the number of private equity

funds. i think we will see 50% less of both in another two to three years. >> as a result of the lack of funds for them? >> yes, correct. >> mr. lindsey, thanks for joining us. appreciate it. >> you're welcome. thank you. >> donald lindsey from gw. coming up, phil george, harvard business school manager, board member of goldman sachs, and exxonmobil. oh, my gosh, best-selling author out with a new book "seven lessons for leading in crisis." he's our guest host for the next hour. man, that guy has got a lot on his plate. and later, eddie lazear, former chairman of the council of economiced ed adviser, telling why he is flat out wrong. you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries.

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but serious side effect. this risk may be increased when trilipix is used with a statin. if you cannot afford your medication, call 1-866-4-trilipix for more information. trilipix. there's more to cholesterol. get the picture. welcome back to "squawk on the street." boy, do we have a surprise for you. august philly fed was supposed to come out with a minus sign, but it came out up 4.2. positive number. immediately the markets responded. we also had pretty close to expectations matched on july indicators. leading indicators up 0.6.

looking for that ball market 0.6 to 0.8. taken together they're both very positive at least with regard to where they have been and, indeed, we see that stock market has jumped a bit. we see that the dollar is now under a little more pressure as stocks jump. and indeed, the interest rate complex is rallying -- excuse me, rates popping just a bit and safety scenario. there's more on mortgage delinquencies. what do we see, diana? >> numbers are still setting new records but it is no longer a subprime mortgage crisis. take a look at the latest. big numbers from the mortgage bankers association, q-2 survey. delinquency rates for all loans in q-2 rose from a year ago. the percentage of loans in the foreclosure process was 4.3. that's up from a year ago. together, just over 13% of all

loans in the u.s. are in some kind of trouble. but the culprits are changing. >> we had 43 states that actually had a drop in foreclosure starts with the subprime loan, completely flip side on the prime side. 43 states. so it's clearly an issue being driven much more by the economy rather than issues with the type of loan. >> now, the percentage of prime fixed rate loans in delinquency rose to 5.23%. spiking just in the past quarter. take a look at subprime fixed. while most dramatic spike over the past three years, of course, it actually leveled off a lot in the last quarter. same with the subprime arms. good news is that foreclosures starts were basically flat thanks to government and banking industry loan modifications program. important to remember, of course, the foreclosure problem is still worth in those four culprit states. california, florida, arizona, nevada. they account for 44% up all foreclosure starts.

talking about this on the blog. go to it. realtycheck.cnbc.com. mark? >> thanks very much. let's get right to it. kick things off with bob pisani here at the big board. robert? >> another chance to sell off the market. and remember, there is a substantial amount of not just bears but bulls like the market to drop a little bit more because they want to buy at a lower price. they're still interested. look at the s&p 500. it hasn't happened. after monday's drop you think you would have a few opportunities to shuttle the market off right at the open. they tried and just like yesterday, it goes nowhere. even market immediately starts rising within a few minutes after dropping just a few points lower here. this re-enforces a lot of the ultrabulls positions that there is a floor under the market. that is actually going to be fairly tough to drop that market, say, 10%. . a lot of bulls would like it to drop to drop lower. financials, techs, industrials, industry leading. doing fine. let me just point out aig. i keep get questions on aig.

second day in a row. question is, is this the second short squeeze in aig? remember what happened a few weeks ago. there was a short squeeze on the reverse stock split. then the earnings came out and did better. it's not clear what's going on. the buying is stronger here. this company is trying to sell the two most profitable businesses. $180 billion, owes the government. long term is not a lot of reason to play these stocks. short term, though, a lot going on here. tradertalk.cnbc.com. how are we at the nasdaq? >> a pick-up in action here. nasdaq is up 3/4 of 1% now after opening virtually flat. google the top story of the morning, conviction buy list at goldman sachs. price target taken up to $5.60 to $5.10. expect the revenue growth to accelerate. google shares are responding up up better than 3% this morning. most big cap technology stocks after showing modest advances after the open have xael rated a little bit further than a.

apple, look at rim up 2%, microsoft is up 2/3 of 2%. intel, negative territory. boy, different story on the bottom row of our wall. netapp down 3 1/2%. beat, gave no forecast, however, for the current quarter. sears holdings is down 11%. reported a loss.gç street was looking for a gain. petsmart is down 12 1/2% on a downgrade at credit suisse, mark. that's the story. big cap tech looks good this morning. other stocks at the bottom of the wall, retail names having a bit of trouble. >> thank you very much, scott wapner. my colleague erin burnett just gave me this. >> breaking news. >> this just in. breaking news. ups, the the world's largest package delivery company today announced it's working with the first company in the world to produce camel milk chocolate and to deliver said camel milk chocolate around the globe. >> what has happened when ups

puts press releases out about that. >> we have had that, by the way, and it's very tasty. we have a guest host for the next hour. bill george, harvard business school management professor. former met tron anythironics. and "seven lessons for leading in crisis," new book. boy, we sure could have used those a couple of years ago if health care, one could say is in crisis right now. do you think this perform push is a train wreck. you have your own plan. >> i think the president made a big mistake, mark, focusing on politics instead of policy. he needed to provide a plan. he went the wrong way. we have a train wreck. this could bankrupt the medicare system. we need to get control over it. i think we need to provide catastrophic coverage for people. we need a major national

wellness and prevention push so people take responsibility for their own health and have saek a. stake in the game. i would like to see more of that. i would like to see -- i favor the co-ops rather than the big national plan. i favor clinics for people to get their primary care. >> co-ops, awfully hard to get a thauf ground. dominated by monsters. >> yeah. >> provided health, aetna, cigna. >> it will take time no, doubt. i think taking a long time to get where we are. they're not going to change us overnight. they've they're trying a top-down health care is too risky and too expensive. that's why i say it's a train wreck. >> your book "seven lessons for leading in crisis," so many people say, well, what can be done at this point? take health care, for example. you have an idea of what would you like to see president do here when congress gets back. >> right. >> hypothetically, to step up and lead, what should he do? >> we have to take responsibility for our health.

basic diet, nutrition, exercise. >> procedurally where we are in this debate? >> i would pull back. i would pull the whole thing back and start over. it is a train wreck. it's going to pass with 51 votes is crazy. the american public is upset, they're concerned. >> do you think he could win if he did that? >> i don't know. i'm not -- that's why i'm not a politician. i think he made a mistake going forward. yeah, i think he can take it piece by piece. i think trying to put the whole thing through and ram it through is a big mistake. you've got to take it piece by piece. he's got to get in touch with quality of care and delivering in hospitals, he needs to get in touch with end of life care, political time bomb right now, he needs to get in touch with costs. until we have a cost -- there's no way to pay for this plan and we can't just say, okay, we're going to tax everyone more because health care will be 30% of the gdp. >> plus, i think one of the things lost so far in all of the screaming from the debt panel

kras cy crazies and the palins and geth grenches. we also have to reform the health care itself. we have to get the costs under control. >> that's where we need to start. >> right. >> square one. >> but you and i need to have some responsibility for all we use the system. how we access the system. you can't just have free health care for everyone. i would like everyone to have access if i don't want them to grow into the emergency room for regular procedures. there has to be something for catastrophic. we need to take responsibility for our health. >> can i interject my own -- >> yes. >> very, very broad brushed plan. cat strof anything needs coverage and preventive, education, preventive, vaccines, et cetera. the stuff in the middle, we can debate that. those are the two, to me, are key. >> you said the key word, preventive. we can save huge costs by people

taking care of themselves. you know? >> yeah. >> it's very hard to incentivize that. everyone says, if i could be paid a little bit more an hour i would be incentivized to lose weight. it doesn't happen. i guess that is why you get to the other issue, the food lobby. the food that people eat. >> we are now getting far field. >> no, i actually don't think it's far field. i think it's a relevant part of the conversation. >> it is, yeah. >> but there are people taking the lead to testing. but i think you have to incentivize people. target now, 360,000 american employees. they find when people are incentivized about their health, same-store sales go up. and they're putting incentive in for taking care of your health. why not? you know? >> all right. we've got the party started. it's going to continue throughout the hour. lots more with our guest host bill george. coming up next, the assault on swiss bank secrecy.

who will the irs go after next? is it a game changer for the world of private banking? and aren't you glad you could never afford that secret swiss bank account? >> mark. ed lazear and you going head to head over speculation in the oil market. did you know you have to have a strong opinion on this, mark? working on the weekends, that is what a lot of people end up doing, all of us do. now workers want their bosses to pay for all that extra productivi productivity. we're going to dive into this one. carol, when you replaced casual friday with nordic tuesday, was it really for fun, or to save money on heat? why? don't you think nordic tuesday is fun? oh no, it's fun... you know, if you are trying to cut costs, fedex can help. we've got express options, fast ground and freight service-- you can save money and keep the heat on. great idea. that is a great idea. well, if nordic tuesday wasn't so much fun. (announcer) we understand. you need to save money.

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unlike me, unlike barack obama, steve liesman catches fish when he uses a fly. former fed governor tonight, marty feldstein will be his guest. >> really? >> and tom, his. the fed in crisis in recovery tonight at 8:00 p.m. eastern right here on cnbc. >> let's turn back to bill george. do you think ben bernanke will be reappointed? >> absolutely. during the crisis, he was a rock. all last fall, the guy was steady as could be. good things he was there. chris cox disappeared on us. if the president puts politics ahead of policy on this one, there's going to be real upset.

bernanke is somebody has confidence is. he's solid and should be reappointed. >> do you think he's better at the a-political nature of the job than greenspan? >> absolutely. >> greenspan enjoyed the politics. >> absolutely. he got into the deregulations lags and now he's denying everything. bernanke is the kind of person you need in the crisis. he's the kind of person you would follow, you know, because -- you can count on him. you know where he is. he gets the job done. i know a lot of people are upset about what happened but somebody had to do it. >> there was -- to your book here, since it's about leading in crisis, the front article in "foreign affairs" this month, a guy from jersey, german newspaper, and the basic theory is americans think they're going in decline every ten years. they expect crisis, america is dying, america is done. and maybe it's the sel

self-obsession that keeps the country great. he thinks that it's america that thinks america is dying. the rest of the world does not think that. do you think the country is being too harsh on snits. >> yes. we need to get back innovation and create companies. we're all thinking negatively. we've got to get on the offense and start, if you will, dominating the world with our product, our ideas, and there's no place in the world that have entrepreneurs like the united states. this is the world's greatest place for innovation. and we need to get back to doing that. that's why we won in the '90s. >> right. >> given the wage gap and the labor gap, that's really where we have to compete, isn't it? >> yeah. >> i hear people -- my own boss has said we need to get back to making more things. but with the wave situation the way it is, seems to me the best task is to dominate the intellectual aspects. >> t-shirts are not come bagging

to north carolina. we've got to get out on front on health care, energy, i.t. and encourage people to form companies. that's where the action is. the general motors and chrysler world are never going to hire more american employees. there's nothing wrong with outsourcing low-wage jobs. there's nothing wrong with that. the brain jobs are staying here. those are the well-paying jobs. >> we're going to keep this conversation. i know there's a lot more. we want to get back to the softer side of "squawk on the street," just kidding. >> yeah. all right. thanks, erin. i wanted to talk this morning about another big bank that is paying back the government. but in this case it is not a u.s. bank, it is a swiss bank. and as you might expect, the government, therefore, is that of switzerland, or the taxpayers are that of the country of switzerland. ubs saying it will sell, or i should say the swiss government is going to sell and actually in

the process of selling $5.6 billion u.s. ubs stake, 332 million shares. they're talking about a range of 16.50 frank each and looks like the taxpayer overs there are going to make a little bit of money as have our own on the repayments received under the t.a.r.p. of the likes of jpmorgan, morgan stanley, goldman sachs, to name just a few. ubs was right up there engoinging itself on u.s. mortgages, creating cdos and stupidly keeping the super senior ceos on its own balance sheet. it took, well, it's right up there. let's call it a big race between criticizedity, ubs and merrill for who took the most losses. ultimately though ubs appears to have come through this very difficult period. concerns now not sz much on the investment bank, which is sort of trying to realign itself. but on its global wealth management business.

of course there's been a good deal of attention there for other reasons dealing with that irs settlement with the swiss government and the like. now, switzerland did say it intends to convert the mandatory convertible notes on tuesday. the government saying the sell would have no material impact or ubs saying that sell will have no material impact on its third quarter earnings. it will have the i'm path of taking town sterling kacapital ratio ever so slightly but ubs has done a good job of replenish that capital. and most importantly, taking down the assets on the balance sheet. that is one way to increase your tier one capital one ratio. not necessarily just bringing in the new money but reducing the size of the balance sheet, as so many large institutions. ubs, shares are up a little over almost 4%. let's call it, in switzerland on this news. erin, back to you. >> all right. thank you, mr. fabe. we will have more on ubs after

the break. husband, lo plus, looking for a place to monday the money that you've been accumulating in your checking and savings account. we will give you investing ideas. later, ed lazear is the former chairman of the president's council of economic advisers. apparently i know the interview he saw. he thinks that mark is wrong. i know mark can hear me out there in the either. he thinks that mark is wrong in the oil speculation. we'll be back. some people buy a car based on the deal they get. others by the car of their dreams. during the lexus golden opportunity sales event, you can do both. special lease offers now available on the 2009 es 350. i felt amazingly boxed in. (announcer) joe uses the contour meter from bayer. (joe) my meter absolutely adapts to me and my lifestyle. i'm joe james, and being outside of the box is my simple win. (announcer) now available in five vibrant colors.

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despite the recession, which may or may not be over, some investors are sitting on a lot of cash they accumulated because they were too worried to put it in the market. our next guest has helpful advice if you are ready to consider even dipping your toe back in with some of that. joining us from financial adviser network, brad. let's just say you've accumulated money, way more than

you want to keep in your bank account. your not really thrilled about pitting it into the stock market. what are you advising? >> hi, erin. i've seen so many people in this situation recently. in many cases the money is in cash because they took it out of the stock market after losing money. so i look at cash as a very defensive position. it's important to be there at times, but right now what i suggest is looking at taking a step away from that defensive position and municipal bonds are attractive. there's been appreciation recently. averaging 5% in bond yields. 4% tax bracket,s that a yield. if you want to move away from that and look attacksable alternatives for bonds, i suggest that you use actively managed funds. we like etfs a lot. i think etfs are a better alternative actually for commodities or elk ququities. for the taxable bonds space use them because credit quality analysis is important right now.

also will tl isn't an efficient market for bonds anyway. so i like the idea of using high-quality funds with short duration, high quality sporp rate bonds and government agencies. such as pimco's total return fund, you can't go wrong using bill gross and his team or jpmorgan or a little bit more corporate exposure. >> bill george has a question for you. >> i think you're on the mark, brad, what you're saying. but what about investing in long-term equity and getting back to that? i think the long-term data shows that that's where the best returns come. i think everyone is spooked on the equity markets as what's happened in the last several years. >> yeah, absolutely, bill. it's kind of like the situation of being once bitten, twice shy. people have lost so much they're afraid to get back in. may be concerned that they missed out on this rally. what i would suggest is dip your toe in equitys a little bit. have exposure there. in the middle, between that

aggressive or even let's just call it an offensive equity position, and the conservative side with bonds, we can use some investments that will give us a risk mediation. have some funds that are actively managed between equities, bonds, commodities and currencies. >> all right, brad, thank you so much. brad levin joining us chl. coming up, natural gas inventories. and we'll see if that bizarre spread between oil and natural gas continues. mark spike coming up. you won't want to miss it.

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ubs, irs settlement could lead to the criminal prosecution of hundreds of wealthy americans, evading paying income taxes. what does this mean for the swiss secrecy laws? joining us is tax attorney and partner with blank and co-author of "tax fraud and evasion." and our guest host bill george actually lived in switzerland and has a lot to add to this conversation. ian, start with you, just on this. it's very hard for a lot of people who have sympathy with people who do this. most of these people -- many of these people though, is it fair to say, may not even have been aware they had the money here or were not perhaps so direct in the point of evasion? >> yes, there's also categories of individuals who have these responsibilities. and in fact, the irs changed the rules last fall.

because they changed the rules they told some people this year they don't have to file until next year. it runs the gamut, they may not have known, people who have herded money and people who knew and were trying to avad taxes. >> i want to make sure people understood. it's not that everybody here is trying to cheat the system. breaking new though right now. natgas inventorienventories, br? >> got them right now. build of 52. that's low end of expectation. expectations ranged from 52 to 67 in terms of billion cue bibb feet. in terms of pricing we are seeing actually some selling pressure. we're really looking at $3 level. you want to see. now it's all over the map, guys. if you looked at the numbers in the way they're fluctuating, down 40 when we started but now improving a little bit. there's no so much action you cannot determine the price. build of 52 bcf, low end of consensus. we'll see how that will affect price level. erin, back to you. >> thanks very much, brian.

>> ian, you seem to be saying -- where did he go? fell off. >> mark's mike fell off. he's getting it on and getting his question ready. >> i'm a little confused. you seem to be saying that some people don't know they have a reported obligation? >> yes. the rules -- look, the reporting obligation for the reporting foreign account, people who have a financial interest, little easier to know if you have a financial interest. the other half is you have signature of other authorities. if you have signature or other authorities, the irs for instance changed the rules in the last year and it may pick up employees and banks, public companies, you know, they extended the rules. you may not know you had a filing requirement. it is over the map. the easy case -- >> excuse me, excuse me. >> yes. >> don't you have an obligation to know what your responsibility is? >> except when you get -- yes

and no. when you give it to signature or -- >> that's right, you're a lawyer. so the rest of the world, if you have an obligation, you're supposed to know that. >> except friends that do have a hedge funds, do you have an investment that is a hedge fund? >> me? >> yes, you. >> hell no. >> you may have a filing obligation you didn't know about if you have a hedge fund. >> mark, they might come after you. >> doesn't the hedge fund have an obligation to tell its investors to they have an obligation? >> the irs, again, changed the rules on some of this. look, we're not talking about everybody. the cases which are public are people who took money from u.s. companies, for instance, sent it offshore. put it in foreign corporations. some of them laundered the money back onshore. that's a different animal. but for the hedge funds, they didn't decide until this year that you may have an obligation as an investor and domestic hedge fund to invest money offshore to file a foreign bank account report. it's not black and white. >> i am -- help me understand. i lived in switzerland for two

years. i was a board of a big swiss company for two years. i always paid u.s. taxes. swiss are good bankers. why are they places we hide money? we had a lot of money cracking the bank accountses to find out people who did inappropriate things. why shouldn't we all pay our x taxes. i don't understand. >> everybody should pay their taxes. i tell my clients to pay their taxes. i would be happy if i was less busy rather than more busy. that's all fine. excuse me. where it gets difficult is, if it's not your account if you have signature authority over or other authority or you have co-mingled funds like the hedge fund for example where it wasn't crystal clear. there, it's not -- it's not easy whether you had to file or didn't have to file. it's not easy whether you are subject to penalties or not. certainly the irs shouldn't being looking at you for criminal prosecution. >> and yet they are? >> no, for that grouping, it

doesn't -- it's not clear they are. if you haven't filed now that the guidance comes out and you miss a year, they may look at you. now they may look at you. some of the area was so unclear, they have a voluntary disclosure program. you can come in before september and avoid criminal prosecution. we've been getting a lot -- a lot of lawyers are getting all sorts of phone calls from people who want to come in before the deadline. now -- how about this for an idea? >> yeah. >> we all file a voluntary disclosure. >> okay. you can do that. >> that will cover it. >> great. >> i know -- i don't have to -- but what the heck, just to be on the safe side, flub the irs with the disclosure. >> listen, you can call me when we're off the air and we'll discuss it some more. >> thank you very much, sir. >> you're welcome. thanks for having me. >> all right. okay. >> this is -- we all get out of this conversation, right? this is the fight. >> i wasn't aware of that.

>> i think this is the fight. yeah, uh-huh. >> i have said on previous occasions that when we saw oil run up to $147 a barrel last year it was clearly a case of speculation. >> make sure you really agree with that before you bring in the guest. >> you have a right to be wrong. ed lazear, former chairman of president's council of economic advisers joins us now. now, i'm out-gunned here. he's an economist. he's an economics professor at one of the most prestigious institutions in the country. yet, i'm fairly confident he's wrong. ed, why do you think this was not a speculative binge? >> i agree with you most of the time, mark. one of the nice things about moving back to california is i get to watch you with my morning coffee. i did watch that statement that you made a few weeks ago. i'll tell you why. first of all, the position that you have was not unusual. in fact, many of my white house

colleagues and cabinet colleagues at the time held the same position. we looked at it very carefully. and let me tell you why i think that is not correct. at least during that period. it's not that speculate kearse not have an affect on prices. but during that period, throughout most of that period the futures price was below the spot price. that's key. because if you're a speculator and you think that prices are going to go up, you don't buy in the spot market and pay to store oil you buy in the futures market. >> yeah. >> so if you're buying in the futures market, you still have to explain why it is that the spot price is not only high and rising but above the futures price. that's the big problem. during that period, because the spot price was high, it could not have been the case that speculators, who weren't in that market, were driving prices up. so we looked at that again. that's a logical argument, but we also looked at that by seeing who was trading looking at net positions and so forth.

we feel quite confy dend that during that period speculators were not driving prices up. >> you were going to finish your point. go ahead. >> the reason it's an important point and it has to do with the discussion that you were having a few weeks ago, is that my big concern is that we will impose regulation on markets and prevent them from working effectively to solve a problem that didn't exist. so, that was the reason that i reacted so strong li, choking on my morning coffee when i heard you say that. >> oh, my lord. i would have been much more channeled. but here's what i noticed, here's what i noticed, now my lawyer's mike kicks in. you are making an assumption that the futures drive the -- that the spot does not impact the futures and vice versa. >> not at all. >> i understand the point you're making. however, my response would be, prove to me that the extra

activity in the futures market, the extra liquidity in the futures market, wasn't what drove the spot price higher. yes, the futures didn't keep up with spot. they were behind spot. but, i mean, you know, you can't tell me that all of that activity in the futures market didn't drive the spot price to where it went. >> well, yes, i can because the spot price was above the futures price. so the question to you -- >> how much above? >> well, $5 above, $3 above. >> okay. >> but the point is that if the price is above, even at all, you know that you don't have speculators in that market buying oil with the hope of storing it and selling it at a higher price. that's what you need -- that's what you need to have happen in order for the spot price to be driven higher by speculators. >> i disagree. go ahead, bill. >> ed, full disclosure. i served on the board of exxon. i'm on mark's side. every month we look at the

numbers. throughout this entire period, $140 to $147, $33, $70. plenty of inventory. supply and dead manned, there's been plenty of inventory. i think you're looking at a technical aspect. i think we need to distinguish between speculation and manipulation. the only thing that's manipulation here, if i buy a share of stock, in a sense i'm speculating. but that's not manipulating. >> right. when you are holding -- >> ed, let me make one thing clear, which bill actually just did. when i said speculation, i meant exactly that, speculation. i didn't mean manipulation, any illegal activity. my point was it was speculators coming in. i'm sorry, but logically speaking -- i understand what you were saying. logically speaking when you suddenly flood any market, the market for cars, the market for tiddly-winks, any market, when you flood that with money, prices are going to go up. >> but you didn't flood the spot

market with money, not by speculators. that's exactly what didn't happen during that period. what you had happening during that period was people trading in the spot market in order to satisfy current demand. you didn't have people in the spot market buying with tin tension of holding and selling later. people who had that intention were buying in the futures market. >> understood. and my point is that you still -- you're still not negating my point because the activity in futures impacted the spot price. >> all right. >> i think i am. we'll have to follow this up at another time. >> all right. >> i want to get clear that he's going to buy the lunch. >> i as arbiter here is going to say the verdict is still out because i want -- >> i didn't agree to arbitration. >> ed will agree because i am not going to pay for lunch. okay, mark, that conversation is done. >> all right.

>> next. >> thank you, ed lazear. coming up, financials are down 30% over the past year but not everyone is losing money. >> we found two financial fund managers raking in double digit returns even over that exact time frame, and they are with us, coming up. brace yourself. that gas guzzler in your driveway, just might be, a clunker. but don't panic, it could be a good thing. your ford and lincoln mercury dealers are cash for clunkers specialists. they'll recycle your ride, and get you a big fat juicy rebate from uncle sam. you can get all the details, charts, graphs, etc, at ford.com. why ford, why now? why not? visit your ford or lincoln mercury dealer. i'm thinking now would be a great time.

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just want to update view ee of sears olding, 12 down. $268 million, well below estimates. gross margins, as i said, flat. merchandise inventories also at $9.4 billion as of august versus $9.5 million at the end of the first quarter. wanted to update this though for you as well. the gross margin part was most interesting. flat. every -- somebody got a big retailers, sears is the fourth largest retailer, have had far

larger increases in their gross margin. on walmart earlier we said 90, it was actually 109 basis points. erin, back to you. >> thank you, david. if your portfolio took a hit in the past year because you owned a lot of the banks which have become a bigger part of the market, you're not alone. joining us now, two five-star managers who got it right. their stocks went up double-digit returns. portfolio manager and industry fund is up more than 10% over the past year. david ellison is portfolio manager with a small cap fund, 16% gain there. good to have you with us. jump in on the citi question. >> the citi question, well, i mean, citi certainly has done a lot of things. we had a lot of government involvement. certainly moving management around, which i don't like, the shareholder. but i think vikram's done a lot of the right things. >> would you buy it? >> we are involved in citi. so, you know, i would love to buy more on a pullback.

it's been straight line like many stocks lately. it will be a while before they earn money. t. shu they shrunk the balance sheet. >> dave, if you were going to go in right now and get into financials, what would you buy? >> well, first, hello to anton. i haven't seen him in a couple of months. hello, how are you doing? >> hello, virtually. >> and i think in terms of my fund, i have about 80 names in the portfolio.ñ> for myself and not just for the viewers. >> okay. so you say you take a group

approach. overall though the group was down and you were up. so if you had to say, what is the thing you're doing differently, what is it? >> well, i guess i have -- i think anton is in the same boat. i had the unfortunate experience of living through the late '80s, early '90s when it happened last night. when the non-performers started to go up it was time to get out. when the non-performers started to rise four, five, six quarters ago i started to sell stock in the portfolio and ended up having 60% cash when things were bad because i was selling out of the way through. now we're at a point where they're starting to go through. now it's time to start saying, okay, we're going to go from ugly to okay from good to great. it's a matter of waiting letting it happen. >> of do you share that optimism? what would be your get into it now? >> the get into it now, distressed assets. i've been buying companies that

buy in the distressed os sets like a marcamaro and redwood tr. first first horizon are going to be the first to come aout of it. i think that's a company that is poised to throw nice earnings off and start to reduce ratios. >> thanks to both. three names there from anton. mark was not in that segment. mark was disallowed from the segment for some reason. you can share a tomato with anton. >> his tomatoes do much better than mine. >> he's up in rochester. up next, this sounds familiar, it's the weekend, you're on your blackberry or cell phone. >> not me. >> but not getting paid for it. mark? >> that's you, kid. and i admire you but i ain't joining you. now, some workers are saying, show me the money!

>> we'll be back. >> plus time and a half. we'll tackle that hot topic next. um bill--

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two recent lawsuits raise questions about whether or not employers should be paid for the time spent responding to e-mails from home. in the current economic climate, employees are expected to work

longer hours with fewer staff and resources. is it legal? joining us, an employment lawyer, and jenny shady, president of jrs consulting. let's start with you, brent, and i want to fully disclose, you are representing some employees who are suing t-mobile for this very issue. make the case for why people should be paid for doing their job on the weekend. >> absolutely. these people need to be paid for the hours that they work. increasingly, technology is being pushed on to all levels of people within an organization. it used to be that only the participants of a law firm, the investment bankers had the blackberries. now it's everyone in the organization, the hourly employees. these employees go in, they clock in when they arrive at work, they clock out when they leave. >> so you're not talking about anyone on salary. people who are paid by the hour is what you're talking about specifically. >> typically. typically, it's people who are paid on the hour. sometimes nonexempt people who are paid salary are also in this situation. but hourly people who are clocking in and clocking out and then forced to do work outside

of regular work hours. they should be paid for this time. >> if you can prove it, how do you not win? i mean, i'm sorry. it seems like a slam dunk to me. as soon as you say hourly employee -- >> right, hourly -- >> you've got labor laws that must be obeyed. >> absolutely. the standards of labor act. it is an issue of proving damages, but i would speak to t mobile's general council. >> it seems if you're talking about hourly employees, they're paid by the hour, and that seems different than a salaried employee. >> so you agree, they should get paid. >> i can understand their bringing a case forward. i'm not an attorney, but i can understand where they're coming from. >> so brent, it's a 24/7 world. everyone is working all hours, and employers really have choices. they can outsource the work, put somebody on a contract and get the project work done, or they can get into a heavy employment

law cases. what do you recommend? >> i recommend being vigilant as to knowing when your employees work. a new study came out by the "wall treat journal" last week that product activity is at a 16-year high. companies have been laying off employees. the companies need to get more work done per employee. and it's really pushing the use of -- the use of work outside of regular business hours. so i'm all about productivity in the workplace, but just let's make sure that these employees get paid. >> we're in a tough economic time, though. is there a place where people should draw the line? i know your consulting companies have been doing reorganizations and layoffs. and it does make it a little bit more complicated, doesn't it? >> it makes it a little bit more complicated. the important thing for employers to be talking with their employees, and making sure that expectations are clear. so if the employer is expecting the employee to be on call, everybody needs to agree to that. >> i'm just concerned it's going

to lose american competitiveness, and you're going to have fewer employees. and we get ged get back to hiring, and i'm really worried about that loss of jobs. >> it's not going to cause a loss of jobs. if anything, there will be more employment. >> why? >> because as soon as people are -- know they're going to be paid for every hour worked, more people are going to take on the job force. >> but he says nobody is going to want to hire them -- >> i know, there are two different sides. >> it's the impossible picture of life today. do you have a blackberry? >> no. >> iphone? >> you're looking -- >> come into the modern world. >> yes, that's true. >> i sit on ferry every morning coming over, and i see everybody is like this. and i'm just kicking back. >> we need to teach you how to twitter. >> i don't want to twitter. anyway, thank you both very much. you know, i get your point,

bill, but at the same time, it seems to me this enormous potential for abusing employees in this way. so -- >> i don't want to do that either. >> all right. thanks to both of our guests. and are we done? boy, that went fast. >> i'm going away from hourly. i think that's what's going to happen. of. >> yes. >> not going to hire hourly, they're going to give you a salary. >> that's what i think, erin. >> take advantage of the worker. >> no, you're not allowed to convert people over to salary, so long as they're covered by the fair labor standards act, switching them to salary -- >> bill, thank you very much. >> thank you. >> next on "street signs." bye. >> this is cnbc.com news now. >> the philadelphia feds' monthly survey unexpectedly positive for august, while the index for leading economic

indicators rose 6/10 of a percent in july. general motors will give cash advance to say dealers who are still waiting for millions of dollars from the government for their cash for clunkers rebate. and sears shares are slumping by over 10% this morning after the retailer unexpectedly reported a quarterly loss. the cnbc.com news now. i'm courtney reagan. good morning, and welcome to "the call" everyone, i am trish regan on this thursday morning, we're watching a dow that is up 41 appointments. there is a big question here, it's happening as the chinese markets rebound. of so the question being, who is responsible? is it china? or is it the u.s.? we're going to hash it out in debate. hey, mandy. >> yeah, who is wagging who? i'm mandy drury, legislation goes into effect today, and you will be affected. of course, the question remains, will it do more harm than good for you? we're going to sort it all out. this is "the call" on cnbc. well, earlier on in the day,

stocks were pressured by a rise in weekly jobless claims, as investors spread over uncertainty with the economic recovery, not helping a terrible earnings report from sears. more on that later. right now, though, the dow has roared somewhat, up by 4/10 of a percent, the s&p 500 gaining by 8/10 of a percent, 1004, and the nasdaq in positive territory, up by 7/10 of a percent, 1982 is the score. trish, what is happening on your end? >> hey, mandy, a lot of people talking about china, and the big rise there after having had a misserable day the day before. and is the u.s. sort of following china? what exactly is the relationship here, as we watch this market climb 35 points higher, despite those jobless claims? i want to bring in bob pisani, who is tracking it all. >> good morning, how are you? >> so jobless claims, not so hot, and yet we're off 35. >> a good chance to drop the market again after the big drop on monday and they just